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A whistleblower reported issues at an affordable housing complex. But a gap in the law meant she wasn’t protected from retaliation.

Kierra Varcos poses for a portrait in Allentown, Pa., on Tuesday, April 16, 2024.
Nate Smallwood
For Spotlight PA
Kierra Varcos poses for a portrait in Allentown, Pa., on Tuesday, April 16, 2024.

As she read the memo explaining why she was being fired, Kierra Varcos felt her cheeks burn and blood pound in her ears.

She had been dreading this moment for months, ever since she raised concerns about what she saw as conflicts of interest and questionable spending by the executive director of the nonprofit where she worked.

Now, the piece of paper on the table in front of her said her employment was over. It specifically mentioned the complaints Varcos had brought to the board — complaints that were supposed to be confidential. The memo said that after her complaints had been investigated, she had created an “uncomfortable work environment,” but to her the real reason was obvious: She was being fired for blowing the whistle.

Employees of federal contractors like the nonprofit where Varcos worked are supposed to be protected against retaliation for reporting wrongdoing. But the complaint Varcos filed against Lutheran Manor of the Lehigh Valley would ultimately help reveal how the law intended to protect these workers still leaves thousands without crucial safeguards against reprisal, a federal oversight agency warned last year.

The gap in protections creates a “serious risk” that will likely discourage whistleblowers from coming forward and embolden employers to retaliate against those who do, according to the inspector general for the U.S. Department of Housing and Urban Development.

Almost a year after Varcos’s case helped flag the loophole, however, HUD has not followed any of the inspector general’s recommendations to close it. The two agencies haven’t even reached an agreement on exactly how many contracts are affected.

Exterior of Lutheran Manor of Lehigh Valley, a HUD-funded apartment complex in Bethlehem, Pennsylvania.
Nate Smallwood
For Spotlight PA
Lutheran Manor of the Lehigh Valley fired Kierra Varcos after she raised concerns about what she saw as questionable spending and conflicts of interest. The nonprofit says Varcos lost her job because of the way she acted afterwards.

‘In complete confidence’

In April 2021, three members of Lutheran Manor of the Lehigh Valley’s board of directors received an anonymous email making a series of allegations about the organization’s executive director, Courtney Doheny.

Kierra Varcos was one of 12 full-time employees at Lutheran Manor, an apartment complex in Bethlehem that provides affordable housing for older adults. The nonprofit has scored highly on HUD inspections, and as of 2022, had a three-year waiting list. Roughly half its revenues come from federal rent subsidies, financial records show.

For months, Varcos had been growing increasingly uneasy about what she saw as questionable spending on the nonprofit’s credit cards, and the fact that a company owned by Doheny’s husband was often hired for repair and maintenance work.

At first, Varcos tried to remain anonymous. But eventually she agreed to discuss her concerns with members of the board of directors. “Please be assured that any discussion(s) are in complete confidence,” one board member told her via email.

When asked about the allegations by the board of directors, Doheny denied any wrongdoing. The board suspended her while they hired an accountant and private investigator to dig into Varcos’s complaints. As a result of those investigations, the board concluded that Varcos’s claims were unfounded.

Still, her allegations prompted some changes. As a best practice, the board created new written policies for procurement, conflicts of interest, and the use of corporate credit cards. Lutheran Manor also stopped working with the company owned by Doheny’s husband, which had been paid more than $450,000 by the nonprofit over the previous decade.

Christopher Curci, an attorney for Lutheran Manor, said in a statement that the nonprofit made this decision “to avoid any further allegations of wrongdoing.” The board approved all of the company’s contracts and invoices, he said. Lutheran Manor had previously disclosed the conflict of interest in its audited financial statements.

Doheny returned to work in July. Curci said that board members did not tell Doheny who had made the complaints. But in September, she said she knew.

In a meeting that month with Varcos to address workplace tensions in the wake of the investigations, Doheny read aloud from a scripted statement: “I want to assure you that while I am aware that you are source of the complaints, you will not be subjected to any retaliation.”

Less than two months later, Varcos was fired.

Expanded legal protections

In 2013, former President Barack Obama signed into law a major expansion of federal whistleblower law that prohibited contractors and grant recipients from retaliating against workers who reported wrongdoing, and charged inspectors general of federal agencies with investigating complaints of reprisal.

Soon after she was fired, Varcos filed a complaint with HUD’s inspector general.

Varcos didn’t know it, but the overwhelming majority of whistleblower retaliation complaints filed with the agency are unsuccessful. Over a two-year period between 2021 and 2023, HUD’s inspector general received 278 complaints alleging retaliation, records show. Only about 20% met the threshold to open an investigation; of those, only 8% made it to the next stage of the process, a referral to the secretary of HUD for a final determination.

After investigating, HUD’s inspector general concluded there was evidence that Varcos had been retaliated against, and took the rare step of referring her complaint to HUD.

Curci said Lutheran Manor disagrees with the inspector general’s findings. The investigation deprived Lutheran Manor of its constitutional right to due process, he said, because the nonprofit was not able to review all the evidence in the case, present its own evidence, or call or cross-examine witnesses.

Varcos didn’t give too much thought to a footnote on the first page of the inspector general’s report on her complaint, which acknowledged that there was some question about whether the whistleblower law actually applied to Lutheran Manor.

It seemed like a technicality. It was actually a bombshell.

‘Not actionable’

In December 2022, Varcos’s complaint came to an abrupt end. A HUD attorney determined that it was “not actionable.”

The decision came down to a quirk of timing.

The law expanding whistleblower protections to employees of federal contractors went into effect on July 1, 2013. It applied to any contracts issued after that date, and to older ones that were updated to include the new provisions. But Lutheran Manor’s contract with HUD predated the law and was never updated. As a result, the whistleblower law did not apply, HUD determined.

The inspector general recommended as a first step that HUD undertake a “comprehensive review” of its pre-2013 contracts to identify how many do not include whistleblower protections. HUD agreed, but balked at the next recommendation — that the agency ask all the organizations with affected contracts to add the whistleblower provisions going forward. The agency agreed only to “consider the impact” of doing this, arguing that following the recommendation would effectively require renegotiating each contract.

A HUD spokesperson told Spotlight PA the agency will add the whistleblower safeguards to contracts when they are updated or renewed. But it will be years before many of the affected contracts are renewed, the inspector general’s office said, leaving thousands of workers without protections in the meantime. Lutheran Manor’s contract was signed in 2010 and won’t be renewed until 2030.

Taken together, HUD’s proposed fixes “do not go far enough,” according to the inspector general’s office. All five of the inspector general’s recommendations to fix the problem, including three that the agency designated a top priority, remain unaddressed. Inspectors general of federal agencies have no legal authority to enforce their recommendations.

Varcos has tried to move on. But years later, remembering the day she was fired still makes her heart race.

“It seems kind of naive, looking back, to think you won’t be punished for doing what’s right.”